“The U.S. economy is showing continued resilience, which coupled with debt cap concerns has led to higher mortgage rates this week,” Freddie Mac’s chief economist Sam Khater said. “Repressed affordability stays a difficulty for concerned homebuyers, and homeowners don’t appear to wish to lose the low rate and put their home in the marketplace. If this case continues to limit supply, it could open up a chance for builders to assist address the country’s housing shortage.”
First US Deputy Chief Economist Odet Kushi analyzed the spread between mortgage rates and 10-year Treasury yields and the way it could change in the approaching months.
“Since the tip of the Great Recession, the 30-year fixed mortgage rate has remained on average 1.7 percentage points (170 basis points) higher than the 10-year government bond yield,” Kushi explained. “However, this spread just isn’t at all times consistent. It tends to expand in periods of economic or geopolitical uncertainty, because it does in today’s market. Since 2000, there have been 59 months, or about 21% of the time, when the typical spread was at the very least 200 basis points.
Kushi noted that there’s a possibility that the spread may narrow, but may not return to historical norms.
“It’s reasonable to assume that the spread, and thus mortgage rates, will fall within the second half of the yr if the Fed takes its foot off the monetary tightening pedal and provides investors more certainty,” she added. “However, it’s unlikely that the spread will return to its historical average of 170 basis points as some risk stays.”
